Crash Course in Disequilibrium Economics

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This is a set of 5 lectures that I delivered last week in Quito, Ecuador, at FLACSO–the Latin American Faculty of Social Sciences. In future years I hope to expand this into two complete courses–one on the history and development of economics from a disequilibrium perspective, and the other on dynamic monetary modeling in economics using Minsky, the Open Source system dynamics program that I have developed with the help of a grant from INET.

Lecture One: Why economics must be a disequilibrium discipline

In other disciplines, I would use the word “dynamic” in place of disequilibrium (and more strictly still, evolutionary, as Veblen argued so long ago). But in economics the concept of equilibrium has become so embedded that the contrasting approach I and many others have championed–thus far without moving the mainstream one iota–is best described as disequilibrium economics.

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Lecture 2: The founding fathers of disequilibrium economics

I cover Marx, Schumpeter, Fisher, Keynes, Kaleckii and Minsky, Goodwin as disequilibrium economists. In a longer course, I will include many others–including Roy Harrod and Janos Kornai.

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Lecture Three: Minsky’s Financial Instability Hypothesis

Minsky’s hypothesis brings these threads of disequilbrium analysis together, with direct influences from Marx, Schumpeter, Fisher, Kalecki, and Keynes–and in that order.

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Lecture Four: Modeling Minsky’s Financial Instability Hypothesis

I built my first model of Minsky’s hypothesis by extending Richard Goodwin’s 1967 Growth Cycle. This lecture outlines both Goodwin’s method, its origins in Marx’s dynamic model from Chapter 25 of Volume 1 of Capital, and how its complex behavior yielded an unexpected but prescient result of a “Great Moderation” preceding an economic breakdown

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Lecture Five: Endogenous Money and Instability

All disequilibrium theorists (except Richard Goodwin) have emphasized the pivotal role of banking and money in disequilibrium thinking, while in Neoclassical equilibrium analysis, banks and money (and most of the time, debt) play no role in macroeconomics.

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About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.
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